By Dennis Mernyi
The federal government has announced the establishment of a new Domestic Base Price (DBP) framework and applicable gas wholesale price for the strategic domestic sector.
This was contained in a statement by Chief Executive Officer (CEO) of The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Engr Farouk Ahmed at the weekend in Abuja.
He stated that the new framework is in fulfillment of the relevant sections of the Petroleum Industry Act (PIA) 2021.
He hinted that the DBP will be determined annually based on the criteria set in the 3ird Schedule of the Act, which will include Reference DBP to prices of gas in countries with significant reserves and production of natural gas.
And ensuring that Base Price considers the lowest cost of gas supply based on a three-tier Cost of Supply Framework. DBP is related market-prices tied to International Benchmarks (for strategic investors)
He said Domestic Base Price shall be the Export Parity Price at the delivery point where there is a dominant supply of gas in Nigeria.
Export Parity Price in this context is defined as a market-driven pricing framework, responsive to fiscal changes and weighed to ensure pricing flexibility while moderating swings to protect fragile domestic industries.
He further explained that the pricing framework for gas conversion industries namely: ammonia, urea, methanol, polypropylene, Low Sulphur Diesel (GTL), shall be as currently specified under the Fourth Schedule.
The law, which was assented to by the President on the 16th of August 2021 and gazetted on the 27th of August 2021, provides a clear regulatory framework for the determination of a market-based pricing regime for the domestic gas market in Nigeria.
In line with Section 167 and 3rd and 4th Schedule of the Act, which requires the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to determine the Domestic Base Price (DBP), three months following the effective date of the Act.
The Chief Executive Officer indicated that the applicable Wholesale Gas Price for the power sector shall be the established Domestic Gas Price.
The NMDA helmsman highlighted that the other commercial sector consisting of cement, non-grid power, iron and steel industries, aluminum, and all such industries requiring gas for heating shall be DBP +US $0.50.
He stressed that these prices shall apply to gas supplied under the domestic gas delivery obligation which shall be determined by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) under Section 110 of the PIA.
The NMDA boss revealed that the Authority is presently consulting with industry stakeholders in the development of DBP and applicable wholesale prices for the domestic gas market.
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He assured that an industry-wide stakeholder engagement will equally be conducted before the final declaration of the 2022 DBP and wholesale price of gas to the strategic sectors.
He expressed appreciation to all investors in the Domestic Gas market and assure them of the Authority’s commitment to ensuring transparency, deepening of the domestic gas market, and creating an investor’s friendly business environment, as the Authority dutifully implement all the provisions of the new regulatory framework.
